The Wagner Daily


A sudden show of weakness in the Semiconductor index caused the Nasdaq to close 0.4% lower on Friday, but the S&P 500 and Dow Jones Industrials chopped around throughout the session and closed 0.2% and 0.1% higher respectively. Despite the losses in the Nasdaq, volume was approximately 3% lighter than the previous day in both the NYSE and the Nasdaq. This prevented Friday from being a bearish “distribution day.”

The Semiconductor Index ($SOX) has fueled the Nasdaq’s rally for the past two weeks, but last Friday’s action was not good. While normal price corrections are to be expected, the $SOX failed to hold above support of both its prior high AND its 50-day moving average, both of which should have acted as support after the index rallied above them earlier in the week. The daily chart of the $SOX below illustrates this:

Although two key support levels were broken, we cannot yet declare that the new short-term uptrend in the $SOX is technically dead because the prior low, around 380, has not yet been violated. As you can see, the $SOX closed right at support of its prior low, which also converges with the 20-day MA. Watch the index to see how it acts around the 380 level in the coming week because a solid close below the 380 level would certainly not bode well for the Nasdaq. If, however, the 380 level remains intact, then we are likely to see continuing, albeit modest, strength in the Nasdaq.

Looking at daily charts of the major indices, you will notice that the S&P 500, Nasdaq Comp., and Dow Jones Industrials have each broken below support of their short-term uptrend lines, which began with the lows of August. However, only the Dow has formed a “lower low” by closing below its prior low from the former uptrend. Both the S&P and Nasdaq are still above their prior lows. The S&P 500 has been finding support at its prior high, around the 1,107 area. The horizontal line on the chart below illustrates this area of support:

Unlike the beginning of last week, we are no longer bullish on the broad market as we enter the new week. The weak action of the $SOX on Friday has caused the Nasdaq to close below support of its uptrend line on the daily chart. However, we also don’t feel the major indices are likely to sell off hard, especially considering that last week’s correction in the Dow and S&P were pretty significant. Therefore, expect to see the broad market enter into a choppy, sideways range, the most challenging type of market to profit from. For now, it appears that cash may be the wisest option because we can always re-enter the broad market after the indices show their hand for the direction of the next major move. We also remain long a bunch of gold and silver mining stocks, as discussed last week.

Today’s watch list:

(No new trade setups for today)

Daily Reality Report:

Below is Morpheus Trading Group’s daily
performance report of closed trades and an update on all open positions from The
Wagner Daily (Intraday Real-Time Room trades are reported separately in The
Wagner Weekly). Net P/L figures are based on the quantity of shares represented
in the MTG Position Sizing Model.

Closed Positions:

    SMH long (half position remaining from Sept. 10 and 17 entries) –
    bought 30.13 (avg.), sold 30.84, points = + 0.71, net P/L = + $104

    QQQ long (from Sept. 24) –
    bought 35.15, sold 34.75, points = (0.40), net P/L = + ($172)

Open Positions:



The remaining shares of SMH hit our trailing stop on Friday, locking in a profit. We also entered QQQ long, but stopped out the same day. We are now flat the ETFs.

Edited by Deron Wagner,
MTG Founder and